Since 1994, the statistical agencies of Canada, the United States and Mexico have coordinated their efforts for the development and updating of the North American Industry Classification System (NAICS) and, since 1999, the North American Product Classification System (NAPCS).

NAICS was erected on a single economic concept, i.e., a production-oriented or supply-based conceptual framework. A single principle makes it possible to create groupings in a systematic way, always under the same rationale, which helps to avoid controversies and errors of interpretation. The original NAICS version is 1997 (NAICS 1997), and as a result of a five-year revision agreement, five revisions have been developed: NAICS 2002, 2007, 2012, 2017 and 2022 (Canada and the United States) / SCIAN 2002, 2007, 2013, 2018 and 2023 (Mexico). It should be noted that the versions are all NAICS classifications but use different year numbers and that each new version replaces the previous one.

The national statistical agencies of Canada, the United States and Mexico implemented NAICS to define and classify all economic activities carried out in each country in order to generate comparable economic information among them. NAICS classifies all economic activities into 20 sectors; it has five levels: sector (the most aggregated), subsector, industry group, NAICS industry and national industry (the most disaggregated). The implementation of the NAICS 1997 classification had repercussions on the time series of statistical programs, but in exchange, significantly improved comparability among the North American countries was achieved, as well as greater detail in the classifications and the certainty of reflecting the current structure of the economy.

Great progress was made in the field of economic classifications with NAICS, but there was still a need for a demand-based classification to cover the lack of statistical information on the products or transactions occurring in the region's economies. For this reason, the NAICS initiative also included a commitment to improve the detail available for market-oriented analysis, which was fulfilled with the development of NAPCS.

NAPCS development

In 1999, Canada, the United States and Mexico launched the development of NAPCS, a groundbreaking international effort. NAPCS is based on a demand- or market-oriented conceptual framework, to facilitate the analysis of economic data based on markets rather than production processes. NAPCS allows, for the first time, comparisons of products among the three North American countries based on how they are used in relation to each other. NAPCS presents a structure that groups detailed products that are used together to satisfy demand in a common way.

For the identification of service products, consultation and research were carried out, the results were presented at trilateral discussions, and agreements were reached on their definitions.

For the identification of goods, the process was different from that for services products. The three countries already generated a vast amount of information on goods, so extensive research was not necessary. Each country drew upon existing statistical classifications for goods used in their respective surveys¹. The countries agreed that the United States would assemble a list of products, designated as the "strawman", that became the basis for analysis and subsequent trilateral discussions. These extensive negotiations over many years involved proposing additions, deletions, rearrangements, and reaching consensus on the scope of each good and the corresponding level of trilateral agreement so that each country could determine its own national detail under that trilateral framework.

It is worth mentioning that, in the case of goods, strawman product definitions were not part of trilateral negotiations, which focused on broad understanding of scope.

Subsequently, based on the identification of strawman products, Canada, the United States and Mexico formed the hierarchical groupings of the NAPCS structure, from the highest section level down to the most detailed trilateral product level. This was the most challenging stage because, even though it was known beforehand that the NAPCS structure would not fully meet the needs of all statistical programs, it was convenient to develop a reference classification that would offer a useful and meaningful way to compare product statistics.

As of December 2015, the North American Product Classification System Beta 1.0 version (NAPCS 2017 for Canada and the United States) was available. This concluded Mexico´s contribution to the development of the first version of NAPCS in order to concentrate its efforts on the development of Mexico´s Product Classification System (SCPM, by its Spanish acronym), for which Mexico applied the experience acquired during the process of developing NAPCS and used it as a reference classification to obtain an optimal national structure and disaggregation of some service products.

NAPCS is the result of more than fifteen years of development, analysis and negotiation that stands as a testament to the continued growth of statistical cooperation in North America.

¹In the case of Mexico, this included the catalogs of its Economic Census and Agricultural Census. The United States referred to its Numerical List of Manufactured and Mineral Products, which Canada also used in an adapted form.

North American Product Classification System 2017 (NAPCS 2017) version Beta 1.0.

Hierarchical structure

Reference.

Quinquennial, in order to maintain consistency with NAICS.

Mexico´s participation in NAPCS updates is limited to supporting the agreements reached between Canada and the United States and maintaining the NAPCS trilateral website.

NAPCS trilateral website:

http://naics-scian.inegi.org.mx/SICPAN/default.aspx

Each country´s classification can be reviewed in detail by following these links:

Canada and the United States implemented NAPCS according to their statistical requirements. The United States first implemented NAPCS 2017 via NAPCS-based collection products in its 2017 Economic Census and subsequently in 2018-2021 Annual Surveys of Manufactures. Producer Price Indices (PPI) and National Accounts did not use NAPCS directly but incorporated NAPCS product data from the 2017 Economic Census.

Although Canada is fully committed to the development and long-term maintenance of a demand-based approach to NAPCS at the trilateral level, it was first to implement a national version of NAPCS mainly based on industry of origin (supply) approach, with NAPCS Canada 2007 implemented for the first time with its International trade statistical program in 2012. Since then, Canada has implemented different national versions of NAPCS, namely NAPCS Canada 2012, 2017 and 2022. Canada has also developed a correspondence table between NAPCS Canada and Trilateral NAPCS which is planned to be released sometimes in the future. More generally, Canada has implemented NAPCS Canada, including its variants, in most of its business surveys (agriculture, energy, manufacturing, wholesale and retail trade, service industries, etc.), international trade statistical program and prices index programs (raw materials, producer prices, etc.). NAPCS Canada is also integrated in the Canadian macroeconomic accounts, in particular through its integration or close alignment the Supply-Use Product Classification (SUPC).

Mexico's Product Classification System (SCPM) development

As mentioned above, in a national effort, Mexico developed Mexico´s Product Classification System 2023 (SCPM 2023) using the supply-based concept to enable the collection of data on the products (understood as goods and services) generated by the economic units² that are classified with the North American Industry Classification System, Mexico SCIAN 2023.

The SCPM 2023 began its development in 2021 and concluded in 2023. The classification will be used in the 2024 Economic Censuses.

²Economic units are the entities that produce goods and services, whether they are businesses, households or individuals.